CFA CFA Level 1 Question of the Week – Alternative Investments

Question of the Week – Alternative Investments

  • This topic has 2 replies, 2 voices, and was last updated Mar-18 by AdaptPrep.
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    • AdaptPrep
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      Which of the following represents the most significant advantage of real estate?

      • Properties can be an inflation hedge
      • Little work required to hold properties long-term
      • No need to worry about governmental regulations
    • smdekhane
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      What’s the correct answer please?

    • AdaptPrep
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      The inflation hedge
      is the advantage to look for. When inflation hits the market, property values
      tend to increase accordingly. What you need to be careful for, though, is that
      this hedge isn’t as effective if there is a long-term, fixed rent agreement.

      Here’s why other potential answers aren’t accurate:

      Little work required
      to hold properties long-term
      — incorrect. Maintenance is required, and
      while a single handyman might be able to take care of a residential house, a
      team is required for most commercial properties.

      No need to worry about
      governmental regulations
      — also not true. You also need to know the state
      and local government regulations.

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